Govt paves way for tax-free gratuity of up to Rs20 lakh
New Delhi: The Rajya Sabha on Thursday approved the Payment of Gratuity (Amendment) Bill, 2018, enabling the government to raise the limit of tax-free gratuity and to fix the period of maternity leave qualifying as continuous service period through an executive order.
Once the gratuity bill is signed into law by the President, the government will be in a position to raise the tax-free gratuity for public and private sector employees from Rs10 lakh at present to Rs20 lakh, which government employees are eligible for after the implementation of the seventh pay commission recommendations.
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An official statement from the ministry of labour and employment said the Payment of Gratuity Bill ensured harmony among employees in the private and public sectors as well as autonomous organizations who are not covered under the Central Civil Services (Pension) Rules. “These employees will be entitled to receive higher amount of gratuity at par with their counterparts in government sector,” said the statement. The pro-worker move comes at a time of various anti-government protests from farmers, traders and labour unions.
The labour ministry said that the decision to amend the law was taken after considering inflation and wage increase in the private sector. “After enactment of the Act, the power to notify the ceiling of the amount of gratuity under the Payment of Gratuity Act, 1972 shall stand delegated to the central government so that the limit can be revised from time to time keeping in view the increase in wage, inflation and future pay commissions,” said the statement.
The amendment enables raising the maximum limit of gratuity to such amount as may be notified by the government from time to time, it added.
The law is applicable to employees who have completed at least five years of continuous service in an establishment that has 10 or more persons. Fifteen days’ wage for every completed year of service subject to the ceiling is given as gratuity.
The amended bill also allows the government to raise the maternity period eligible as continuous period of service for gratuity purposes from 12 weeks to such period as may be notified from time to time. The government had earlier amended the Maternity Benefit Act of 1961 to raise maximum paid maternity leave from 12 weeks to 26 weeks by an amendment last year.
Ensuring sufficient retirement savings for workers is important for policymakers as the elderly population has been growing at twice the pace as the general population in the last decade. This trend could necessitate higher public spending on healthcare.
According to a 2016 report by the Central Statistics Office, the elderly population of 60 years and above expanded at the rate of 35.5% during 2001-2011, while the growth rate in the general population was slower by half at 17.7%. In the case of unorganized sector, the government has been introducing health and medical insurance schemes as a social security measure.